Urban land-use regulations often bind at project-size thresholds, yet little is known about how

such rules operate in built-out metropolitan markets. Standard models predict bunching below

thresholds and reductions in project initiation. I show that these predictions break down when

development occurs primarily through redevelopment within a durable built environment. I study

the 2019 tightening of the Paris Region’s administrative approval procedure for large office devel-

opments, which introduced a discontinuous regulatory wedge within a sharply defined perimeter.

Using a border-based difference-in-discontinuities design, I compare municipalities just inside and

just outside the boundary before and after the reform. The results reject a quantity-based account

of threshold regulation. I find no evidence of bunching, no robust decline in office permitting,

and no increase in net housing supply. Instead, the adjustment operates through redevelopment

margins. Residential permits become more likely to involve demolition, intervention on existing

structures, housing loss, and office-related transformation, while office permits shift away from pure

office expansion toward mixed-use and housing-generating forms. Consistent with a tightening of

office-side constraints, office prices increase following the reform, whereas residential prices do not.

These findings imply that in built-out urban environments, threshold-based regulation binds pri-

marily through the reorganization of redevelopment within existing structures rather than through

aggregate quantity adjustment. As a result, standard quantity-based measures can substantially

mischaracterize the economic incidence of land-use regulation. More broadly, the paper high-

lights redevelopment as the central margin through which urban policy operates in constrained

metropolitan markets.

Keywords: Land Use Regulation; Urban Economics; Real Estate Development; Housing Prices; Spatial

DiD

JEL: R31; R38; H31